Thursday, 2 March 2017

Characteristics of a Successful Business - M&A Transactions

Many businesses fall short of their potential valuation or maximum sale price. While there is no such thing as a perfect business without flaws or challenges, the businesses which sell at the top of the valuation range or command the highest multiple embody a number of common characteristics.

1. Increasing revenue/profits. Cash is the fuel of business. Businesses that have strong financials with year over year growth in revenue and profits will be in demand and should achieve an attractive valuation.

2. Clean Books. Having accurate, detailed, up-to-date and professionally prepared financial statements and records is one of the most critical components to a successful business sale.

3. Bright prospects for future. Businesses that operate in an industry that has a strong outlook for continued growth in the years ahead will be highly sought after.

4. No customer concentration. A business that has a diverse and broad customer base will have a lower risk that the loss of any one customer will have a material impact on the revenue and profits of the business.

5. Multiple vendors. Companies with a diversified product and/or service offering with a deep bench of suppliers and partners will be a less risky acquisition than a company who is dependent on only one manufacturer or service provider to generate income.

6. Stable work force. Having a loyal and content work force with long term employees is always a positive attribute for a buyer seeking to acquire a privately held business.